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Say cheese! Olympus executives admit fraud

In one of the biggest Japanese corporate scandals ever, Olympus and three of its former executives have pleaded guilty to a $1.7bn cover-up.

by Michael Northcott

Published: 25 Sep 2012

Last Updated: 04 Sep 2013

It was only the opening of his trial, but the former chairman of camera-maker Olympus Corp, Tsuyoshi Kikukawa, has pleaded guilty to charges of false accounting, in a scheme which covered up huge losses of around $1.7bn. Two other executives also pleaded guilty in Tokyo District Court. The charges against them include hiding losses stretching as far back as the ‘90s, and could mean that they each get 10 years in the clapper.

The fraud was originally brought to light when the former chief executive of the corporation, British-born Michael Woodford, was given the sack for challenging the chairman and board over certain payments. He raised the alarm when some extremely large payments related to the firm’s acquisitions came to his attention. Woodford blew the whistle to an FT journalist the day he was sacked, and the scandal went global. Kikukawa said in court today: ‘There is no mistake, the entire responsibility lies with me.’ He also said: ‘I feel deeply sorry for causing trouble to our business partners, shareholders and the wider public.’

It’s odd that he should feel so ‘sorry’ about it when history would suggest otherwise. In MT’s interview with Michael Woodford, published in March this year, Woodford explained that when he blew the whistle on the financial shenanigans, he was fired ‘on grounds of gross misconduct.’ Kikukawa later claimed that Woodford had ‘ignored the firm’s organisational structure’, and that his style of management was not in line with the rest of the board. So having dismissed Woodford, and done a fair bit of damage to his reputation, now Kikukawa is sorry for ‘causing trouble to our business partners’? We don’t reckon that’s going to wash with a judge, somehow…

Still, some lawyers are suggesting that the company could be fined as much as $1.3m and that the executives involved could face personal fines of up $128,000 in addition to their jail sentences. The share price of the firm has more than halved since the scandal came to light, and at one point it almost dropped out of the Nikkei index. Predictably, its weakened status has made it interesting to buyers looking for a bargain: it is now rumoured that Sony is looking to invest around $642m in the company, becoming the biggest shareholder with around 10% of the equity. Lo, how the mighty have fallen…